What is a Head of Income?

What is a Head of Income?

The term head of Income is confusing for some people; however, it is not so difficult to understand its meaning. There is no difficult concept involved; just think in terms of equations below:

Head = Account

And

Head of Income = Account of Income

In Pakistan, there are five accounts of Income. Each account (head) denotes a separate type of Income. The five accounts or Heads of Income are:

(1)      Salary,

(2)      Income from property,

(3)      Income from Business,

(4)      Capital gains, and

(5)      Income from other sources.

The purpose of maintaining five heads of Income is obvious: we need these accounts or heads to manage and understand from where government is getting money. For example, we can easily compare Income Tax paid by the salaried persons and by business-persons.